Every business owner knows Amazon. Millions of business owners use Amazon. Not many business owners understand how Amazon affects the whole sales tax situation.
This is a problem. Because European governments are getting increasingly strict about EU VAT compliance, from large online marketplaces like Amazon and from individual sellers like you. Under governmental pressure and worries about getting caught in a legal net, Amazon has started leaning on their sellers to comply with VAT, too. If they find sellers that aren’t properly VAT registered, they’re shutting down the accounts.
That said, some e-commerce rules now hold marketplaces responsible for VAT, that they must collect and declare the tax on certain merchant sales. We'll clarify the different versions of Amazon FBA and how these rules affect your tax obligations below!
Here you’ll find all the information you need about how using Fulfillment by Amazon impacts your EU VAT obligations.
Really quick, what is Amazon FBA?
Might as well start with the basics! Here’s a brief overview of Amazon’s fulfillment solutions.
“Fulfillment by Amazon” is actually three service options that take care of some or all of the sale & delivery process. In three different ways, FBA can take product distribution and delivery off your plate.
Amazon has several marketplaces in Europe: Spain, France, Italy, Germany, Poland, Czech Republic, and the UK. With Pan-European FBA, your products could be stored locally in any marketplace, ensuring faster delivery times and avoiding many cross-border delivery fees. The catch: since your products are stored in warehouses in other countries, you must also register for VAT in those countries. (By the same token, since your sales are shipping from different origins, you likely don’t have to worry about hitting distance selling thresholds. More on this later!)
Multi-Country Inventory (MCI)
MCI is very similar to Pan-European FBA, except you get to choose one or more individual marketplaces, rather than enrolling in all seven at once. Wherever you enroll, you’ll have products stored in local warehouses and must then register for each country’s VAT scheme. For deliveries to any other European marketplace(s), you must pay cross-border delivery fees. And you’ll also have to watch your distance selling thresholds, in case you need to register for VAT in an additional EU country.
European Fulfilment Network (EFN)
EFN is arguable the simplest version, just Amazon’s solution to help you store and ship your items. Your products are stored in one Amazon Fulfillment Center, where you’re already registered for VAT (or you should be!). For deliveries to any other European marketplace(s), you must pay cross-border delivery fees. And you’ll also have to watch your distance selling thresholds, in case you need to register for VAT in an additional EU country.
How do you comply with EU VAT using Amazon FBA?
July 2021 brought new EU VAT rules for e-commerce, which affect both marketplace sellers (you) and the marketplaces (such as Amazon).
Amazon seller based outside of the EU
Here it’s a bit tricky, since VAT compliance depends on a few factors, such as how the transaction is made, where your goods and buyers are located, and also the value of what you’re selling.
Amazon might collect and declare VAT for you, if:
- You store inventory in an EU country and sell across borders to a customer in another member state, also known as “cross-border sales.”
- Or you import goods with a total value under €150 to a customer in the EU.
For more in-depth information, read How EU VAT rules for online marketplaces affect your business.
If you import physical goods to the EU, those goods are less than €150 in total value, and you also sell off of Amazon, then you should probably also register with the Import One-Stop Shop (IOSS). (Higher-value imports follow the same import and customs rules as before.)
If you store inventory in any EU member state, you should probably also enroll in the non-Union scheme of the One-Stop Shop (OSS). Amazon will not handle VAT on any sales that do not cross country borders.
Amazon seller based in the EU
As an EU business, you may register in the Union scheme of the One-Stop Shop (OSS), which will cover your B2C sales across all 27 member states. You can register directly in your home country, and then you’ll need to follow the new OSS rules outlined here. The great news is that you only file one tax return every quarter, no matter how many EU countries you sell in!
Amazon currently has no responsibility to collect or declare VAT on your behalf for any sales made in the EU.
Steps to VAT compliance for Amazon FBA sellers
1. Register for the OSS or IOSS.
2. Charge VAT when necessary, at the correct tax rate! This can be tricky. Each EU member state has its own VAT rate. Typically, you’ll charge VAT based on your buyer's lcoation.
If the customer is a registered business and provides their own valid EU VAT number, then you don’t charge or collect the VAT. Instead, you follow the reverse-charge mechanism, and the buyer handles VAT on their end.
3. Send VAT invoices to the customer, and keep them in your records for 10 years. Yep, that’s right. The EU requires VAT-registered businesses to store invoices for ten years, and to make them digital, too. Here’s what VAT invoices are required to include:
- Your business’ name and address
- Your business’ VAT number
- Invoice date
- Invoice sequencing number
- Buyer’s name and address
- Buyer’s VAT number. If you are using the reverse-charge mechanism, you must also add the text “EU VAT reverse-charged”
- VAT (amount and rate) applied to each item
- Final amount after VAT is added
- The currency used
4. File VAT returns every quarter. You can do this in the OSS or IOSS online portal.
What can help you handle EU VAT on Amazon FBA?
While Amazon helps you fulfill your orders to customers, it does not necessarily help you fulfill any of these tax obligations.
Where Amazon’s service stops, Quaderno takes over. The Quaderno integration with Amazon FBA will seamlessly handle all the following VAT sticking points:
Automatic VAT calculation and collection. Quaderno charges the correct amount of VAT, based on the ship-from or ship-to location.
Automatic VAT invoices, fully customized. Amazon’s invoices don’t allow you to customize the tax information that EU laws require. Quaderno includes all necessary tax info. Plus it sends invoices automatically, in several foreign languages and currencies.
Automatic threshold notifications. While Amazon FBA doesn’t monitor any distance selling thresholds for you, Quaderno automatically tracks your annual sales and tax thresholds in every country.
Instant tax reports for easy filing. In the click of a button, Quaderno provides you with a full tax report for each country where you have a tax permit. Before you file any tax return, use Quaderno’s instant reports to have all the necessary info at a glance. You can file tax returns in mere minutes.
Or, if you'd rather leave tax returns to the professionals, we'll connect you with a verified tax filing service!
And another great thing? Connecting Quaderno with your Amazon account only takes a minute. Give us a try with a free trial.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.